‘The Supermodel and the Brillo Box’, by Don Thompson

Art prices are determined by the meeting of real or induced scarcity with pure, irrational desire, and nothing is more manipulable than desire.”

So wrote the brilliant art critic Robert Hughes. But Hughes, sadly, died in summer 2012, and such is the speed of change in the art market that he would probably already be bemused and, perhaps, appalled by the realities described in Don Thompson’s new book, The Supermodel and the Brillo Box.

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IN Non-Fiction

Thompson, an economist and professor of marketing and brand strategy, is well placed to anatomise the workings of this strangest of businesses. The unspoken, but widely acknowledged, truth about the art market is that almost no one understands its twists and turns, and the story of the past five years, from spectacular crash in 2008 to stratospheric rebound in 2013, once again seems to defy all the laws of economic logic.

In 2008, Thompson’s book The $12 Million Stuffed Shark began the story. With this follow-up, he uses anecdotes, insights, and armies of facts about deals and auction houses, artists and collectors, the new markets and the old money to convey an art world of baffling, though fascinating, complexity.

What happened, very briefly, is that the art market hit an all-time high in 2007, with prices spiralling crazily upwards. By the late autumn of that year, however, everything was changing and with equal speed, from 2008-10, the market went into dire retreat. The much-vaunted Damien Hirst sale at Sotheby’s, in autumn 2008, was one of the exceptions that proved the rule: after that high point, Hirst’s prices, like many others, plummeted.

The comeback of the top end of the art market – with the cream of auction sales in 2013 equalling and surpassing the high point of 2007, though with much of the middle market still in the doldrums – is what this book is about.

Thompson talks us through the black ops of the auction houses, the activities of the über-dealers, and the tactics of mega-collectors such as the Mugrabi family, who own some 800 Warhols and control the market in that artist as well as several others.

It’s also a great book for people who like lists: we get the top 22 collectors and gallerists and, more interestingly, a comparative list of the top 20 contemporary artists as compiled in 2008 and 2013 – with surprisingly little crossover.

And it is richly packed with stories that illuminate some of the basic mysteries: for instance, why do people buy art? (Desire, branding, status, pride of possession, loot.) And why on earth do we all get so excited about it? When New York collector Leon Black was identified as the man who had forked out $119.9m for Munch’s “The Scream” in May 2012, he made the front page of The New York Times and almost every newspaper and television news channel in the western world. Yet a billionaire could have paid the same price for, as Thompson puts it, a “moderately impressive yacht”. Would that purchase have caused any comment at all?

Not only are we obsessed with art prices, we want all the news to be good news. “No headline”, as Thompson points out, “described the resale of Roy Lichtenstein’s ‘Still Life with Mirror’, purchased in 2008 for $9.6m and auctioned at Phillips de Pury in May 2011 for $6.6m, producing a negative return of 18 per cent a year. No newspaper art section trumpeted Damien Hirst’s ‘Midas and the Infinite’ . . . purchased at Sotheby’s London for £825,000 ($1.48m) and resold at auction three years later for £601,000 ($947,000) . . . a negative rate of 20 per cent a year.”

These statistics come in Thompson’s inevitable chapter dealing with contemporary art as an asset class, the contents of which can be summed up in two words: caveat emptor. These days, one book after another (notably, Melanie Gerlis’s excellent Art as an Investment: A Survey of Comparative Assets, 2012) points out the huge pitfalls of buying art for investment: sky-high levels of risk, illiquidity, a fashion-driven nature that can see last year’s “in” artists fail even to be accepted for resale by the big auction houses. Even at the startling top end of the market, he reports, no work of art purchased for more than $30m has ever resold at a profit. Furthermore, “half of the works purchased at auction in 2013 will likely never again resell at their hammer price”.

That last remark, with its fatal “likely”, exemplifies the weakness of Thompson’s book. Although lively, enthusiastic, opinionated and fun to read, it sometimes suffers from an over-exuberance towards the facts, failing to distinguish between actuality and supposition. Just like the art market itself, perhaps.

Jan Dalley is the FT’s arts editor

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